Thank You

Error.

For some investors, just about any Website watchlist or trading shortlist qualifies as a portfolio. But true portfolio design is best applied to longer-term positions that form the core of your investible assets. Since holding periods could extend from here to (our embarkation for) eternity, we take pains to diversify this collection and keep it closely tracking what academics call the 'efficient frontier' where investors can receive the greatest possible reward for a given amount of risk.

Two Web-based services, Macroaxis and ChartLabPro, recently have devised new ways to try to help investors balance the risk and return in their portfolios.

Macroaxis' toolset (macroaxis.com) helps subscribers figure out just what the right balance is for different collections of securities. A variety of tables and sophisticated analytics are available to address all of the tasks involved in asset allocation as it's practiced in Modern Portfolio Theory (MPT), the most common form of portfolio design. But most of us need only click the Optimize Portfolio button to have Macroaxis provide the least risk/greatest reward configuration for a particular set of tickers. If, for example, your portfolio is overweighted with U.S. and emerging-markets stocks, it might suggest you add exposure to real estate or commodities.

Its optimization algorithm works well. Attempts to stress or fool it purposely loading a portfolio with lots of highly correlated securities or completely uncorrelated assets were unsuccessful. It accurately describes portfolio constituents by common MPT measures such as Standard Deviation and recommends how many shares of each security to buy and sell.

With free membership comes a year of historical market data and limited access to analytics such as correlation analysis and portfolio backtesting for four separate portfolios of up to 12 securities each. A $20-a-month premium membership adds three years of historical data and unlimited access to analytics for the same number of stocks.

In an ideal world, we would build our portfolios from scratch using a diversified mix of relatively uncorrelated assets capable of market-matching returns over decades no matter how individual securities prices rise and fall in the interim. Some Web-based systems like MarketRiders (marketriders.com) recommend sticking to low-cost exchange-traded products (ETPs) whose multiple constituents act as proxies for a diversified portfolio of assets.

Macroaxis doesn't do that. It attempts to optimize even less-than-perfect portfolios filled with individual stocks, high-cost mutual funds and the sow's ears most of us have in our collections. Important to keep in mind: Macroaxis takes the long view. Even though the site offers a wealth of information about many U.S. equities and others from two dozen offshore exchanges, its portfolio recommendations address only long-term portfolio return. It doesn't offer judgments about bad eggs you might have in your basket.

That's where ChartLabPro (chartlabpro.com) comes in. The site's current business is to apply expert technical strategies to help traders evaluate the short-term prospects of individual stocks for $10 monthly. But traders have long-term holdings and cash to manage, too -- at least, successful ones do.

So in early February, ChartLabPro will roll out a $15-a-month service recommending how those funds should be allocated across a handful of ETPs. A subscriber selects one of four levels of risk tolerance. After that, the site recommends specific amounts to apportion across as many as five ETPs—each a proxy for either U.S. equities, emerging markets, fixed income, commodities or real estate.

That's pretty standard stuff, except that both ChartLabPro's asset allocation and rebalancing recommendations will be driven by the same technical analysis algorithm it uses for trading recommendations. The site will continuously monitor the relative strength of its ETPs; and, every 70-to-90 days, tell subscribers specifically how much of what asset to rotate into, explains President Brett Golden.

It's not the same as stock-picking or research, but it's a big improvement over the typical quarterly or annual rebalancing just to maintain asset allocation levels used by most MPT systems. ChartLabPro's model portfolios are designed to tolerate something less than market-level returns, but with half the risk of the market. The service is a response to subscribers who've called to ask for a relatively safe strategy for their surplus funds, explains Golden.

A lot of legitimate questions about MPT assumptions have been raised since the 2008 market crash took many supposedly unrelated assets down in a heap. But it's still safe to say that diversification beats the alternative.